CPI inflation

After RBI and Barclay’s Alarms on Rising Inflation, FM Says Retail Inflation Now ‘Stable’

Sitharaman’s statement comes after Barclay’s estimated last week that India’s retail inflation may have crossed the RBI’s tolerance limit of 6% in November from 4.87% in October.

New Delhi: Union minister for finance Nirmala Sitharaman informed the Lok Sabha on Monday (December 11) that India’s retail inflation is now stable and within the Reserve Bank of India’s (RBI) tolerance band of 2% to 6%.

Sitharaman’s statement came in response to a starred question by Aam Aadmi Party MP Sushil Kumar Rinku about whether the Union government has “taken note” that the country’s retail inflation is “increasing steeply”.

“India’s retail inflation has declined from an average of 7.1% in April-October 2022 to 5.4% in the corresponding period of 2023,” Sitharaman said in her written reply.

“The retail inflation is now stable and within the notified tolerance band of 2% to 6%. A steady decline in core inflation, estimated after removing volatile food and fuel items from retail inflation, has been critical in weakening the inflationary pressure in the Indian economy. The core inflation has declined from 5.1% in April 2023 to 4.3% in October 2023.”

Sitharaman added that “temporary increases in inflation on a few occasions are caused by demand-supply mismatches arising out of global shocks and adverse weather conditions.”

She said that proactive supply-side initiatives by the government and effective demand stabilisation measures by the RBI have helped resolve the demand-supply mismatches and to rein in inflation.

Sitharaman’s statement comes after Barclay’s estimated last week that India’s retail inflation may have crossed the RBI’s tolerance limit of 6% in November from 4.87% in October, reported Mint.

In July, India’s retail inflation rate jumped to 7.44% – a 15-month high due to a massive surge in vegetable prices, data by the Ministry of Statistics and Programme Implementation showed.

The data showed that retail inflation easily breached the upper limit of the RBI’s tolerance band of 2% to 6% for the first time in five months.

On Friday, RBI governor Shaktikanta Das said that high-frequency food price indicators “point to an increase in prices of key vegetables which may push retail inflation higher in the near-term,” reported The Indian Express.

“The near-term outlook is masked by risks to food inflation, which might lead to an inflation uptick in November and December,” Das said, adding that “food inflation is going to increase”.

He said that “significant progress” has been made in bringing down inflation to below 5% in October.

Das said that retail inflation is projected at 5.4% for 2023-24.

Sitharaman said that the measures taken by the government to restrain inflation include the strengthening of buffers of key food items and making periodic open market releases, easing imports of essential food items through trade policy measures, preventing hoarding through the imposition/revision of stock limits, and channelling supplies through designated retail outlets.

She added that to ensure food security to the poor, the Pradhan Mantri Garib Kalyan Anna Yojana that provides free food grains to about 81.35 crore beneficiaries, has been extended for a period of five years with effect from January 1, 2024.

She also cited that in October, the Union government also increased the subsidy under the Pradhan Mantri Ujjwala Yojana from Rs 200 to Rs 300 per 14.2 kg cylinder.

In August, the Narendra Modi government reduced the price of LPG cylinders by Rs 200 and pegged it as a “Rakhi gift” to the women of the country.

However, the cut ended up highlighting inflation and the price increase of the last three years.

Inflation Reached a 15-Month High. Here’s What That Looks Like.

Household savings of Indians are at a five-decade low amid soaring food prices, a depreciating rupee and uptick in fuel prices.

New Delhi: On June 1 this year, Rs 20 would have bought you a kilogram of tomatoes. By August, though, you would have been able to afford roughly half a tomato in that amount of money.

So what’s going on?

The inflation rate is predicted to remain above the Reserve Bank of India’s (RBI’s) tolerance band for the month of October. This, after India’s Consumer Price Index (CPI), a key measure of retail inflation, reached a staggering 7.44% in July, marking a 15-month high.

This surge in prices exceeded the RBI’s inflation tolerance band of 2-6% for the seventh time and went beyond 7% thrice in the past year.

The CPI is calculated on the basis of a weighted average of around 450 items of which almost 50% are food related. The recent rise in the CPI, driven in large part by soaring food prices, is leaving households grappling with the impact on their daily budgets.

Tomatoes, in particular, saw a dramatic price hike between July and August, with costs doubling in just a matter of weeks. For the first three weeks of June, tomatoes cost around Rs 20/kilo. In the third week of that month, tomato prices doubled to Rs 40/kilo, and then shot up to Rs 100/kilo by the end of the month. In August, prices reached Rs 200 and peaked at Rs 350/kilo.

But tomatoes aren’t the only food item undergoing price hikes. Cereals like rice and wheat, pulses, vegetables and spices have all seen an uptick in prices. The inflation rate for cereals and related products also increased to 13.04% year-on-year in July from 12.71% in June.

To better understand the extent of food inflation, rating agency Crisil releases a monthly ‘Rice and Roti’ report that tracks price changes of the various commodities used to prepare a vegetarian and a non vegetarian thali.

A vegetarian thali comprises roti, vegetables such as onion, tomato and potato, rice, dal, curd, and salad while for a non-vegetarian thali, chicken instead of dal is considered. The monthly change reflects the impact on the average consumer’s expenditure.

The cost of a vegetarian thali rose by 24% to Rs 33.8 and that of a non-vegetarian thali by 13% to Rs 67.3 in August, as compared to the same period in the last year, according to a report released by Crisil.

In July, the surge was on a month-on-month basis with the cost of vegetarian and non-vegetarian thalis rising 34% and 13% compared to June.

The inflationary pressure from rising food prices, an uptick in the price of fuel and a depreciating rupee has resulted in people relying on their savings to meet their consumption needs. The net household savings of Indians dropped to a five-decade low in 2023.

The net financial savings of households fell to 5.1% of the GDP in FY23, down from 7.2% in FY22. The data indicates a significant income crunch and the temporary nature of the post-pandemic increase in spending.

Worryingly, annual financial liabilities of households rose sharply, indicating larger-than-usual resort to loans for consumption purposes, Financial Express reported.

Given the increased reliance on loans to meet consumption needs and stagnant income levels, households’ loan repayment ability is bound to be affected and increase lenders’ default risk. It is also important to note that the top 10% of the Indian population holds 77% of the total national wealth. Owing to the vast income inequality in the country, the result of such inflationary pressure on different households will be vastly different across different income bands.

A survey that would enable us to adequately gauge how much money people spent on their consumption needs – the Consumer Expenditure Survey (CES) – has been carried out by the government but its findings have been withheld. The results for 2022-23 and 2023-24 CES are likely to come only after the 2024 general elections, The Wire had reported. The findings of a similar exercise done by the government in 2017-2018 were also withheld but the leaked data had shown a rise in poverty levels and a 45-year high in unemployment in 2018.

The CES findings are also integral for calculating CPI and understanding the true extent of inflation in the country. In the absence of the latest numbers, the CPI is currently calculated on the basis of more than a decade-old data from 2012.

At 15-Month High, Retail Inflation in July Jumped to 7.44% Owing to Soaring Vegetable Prices

The data released by Ministry of Statistics and Programme Implementation showed that retail inflation breached the upper limit of the Reserve Bank of India’s tolerance band of 2%-6% for the first time in five months.

New Delhi: India’s retail inflation rate jumped to 7.44% in July – a 15-month high – thanks to the massive surge in vegetable prices, especially tomatoes in the last month.

The data released by the Ministry of Statistics and Programme Implementation on Monday, August 14, showed that retail inflation easily breached the upper limit of the Reserve Bank of India’s tolerance band of 2% to 6% for the first time in five months.

The Consumer Price Index (CPI) inflation for July is a huge jump of 257 basis points compared to the revised June number of 4.87%. It is also worth noting that it is the 46th month in a row that it has surpassed the RBI’s medium-term target of 4%.

Recently, Reuters published a poll of 53 economists who had estimated that the CPI inflation would rise up to 6.40% on an annual basis on rising food prices. However, the latest figure show that it has even exceeded the expectation of economists, according to The Indian Express.

From 4.49% in June, the consumer food price index (CFPI) jumped to 11.51%. And, the rural inflation rate in July rose to 7.63% year-on-year from 4.78% in July. On the other hand, urban inflation witnessed a jump from 4.96% to 7.20% in July.

This comes against the backdrop of RBI keeping policy rates unchanged at 6.50% in its August monetary policy review. However, it raised the forecast for CPI inflation for fiscal 2024 from 5.1% to 5.4%.

The RBI has already predicted that the inflation rate would see a further rise in the coming months owing to skyrocketing vegetable prices.

While hoping that the surging vegetable prices may soon see a downward trend, it said “possible El Nino weather conditions, along with global food prices need to be watched closely, against the backdrop of skewed Southwest Monsoon”.

Government Lifts Curbs to Allow Tomato Imports From Nepal; Veggies To Reach UP by Friday

The increase in tomato prices this year is expected to linger until October due to a tightening in supply.

New Delhi: Union finance minister Nirmala Sitharaman announced in parliament on Thursday (August 10) that the government has initiated tomato imports from Nepal.

The move comes amid an increase in tomato prices across the country, which reached as high as Rs 250 per kg in some markets in July.

“We have … initiated imports from Nepal by removing the import restrictions, and the first lot of tomatoes from Nepal are likely to reach Varanasi, Lucknow [and] Kanpur by Friday itself,” Sitharaman said during Thursday’s no-confidence debate in the Lok Sabha.

She also spoke of other measures the government was taking to provide relief from the price rise.

“Procuring of tomatoes from tomato-growing regions of Maharashtra and Andhra Pradesh, and also Karnataka, and distribution of these through cooperative societies like NCCF [National Cooperative Consumers’ Federation] and NAFED [National Agricultural Cooperative Marketing Federation of India] are all happening,” she said.

“[In] Bihar, West Bengal, Uttar Pradesh, Delhi and Rajasthan, this has already started from July 14.”

Also Read: Tomatoes: The Modi Government Has Made a PR Stunt Out of a Real Issue

Sitharaman added that mobile vans were selling tomatoes in Delhi and that the NCCF will hold a mega-sale of the vegetable in the city this weekend, selling it at a subsidised price of Rs 70 per kg.

Tomatoes experienced a runaway price rise in India starting in June due to a combination of factors including erratic monsoon rains, higher temperatures and tomato virus outbreaks.

News agency Reuters reported that although tomato prices usually start decreasing in August when the harvest reaches markets, tight supplies this year may cause prices to remain high until October.

Other crops have been affected by the monsoon as well. The resulting increase in food prices is expected to likewise push retail inflation levels above the Reserve Bank of India’s (RBI) upper target of 6%.

The RBI’s monetary policy committee said on Thursday that it projected consumer price inflation for Q2 this year at 6.2%.

Rising Food Prices Drive June Retail Inflation to a Three-Month High of 4.81%

According to government data, the inflation in the food basket was at 4.49% in June, higher than 2.96% in May. The food basket accounts for nearly half of the Consumer Price Index.

New Delhi: Retail inflation rose to a three-month high of 4.81% in June, mainly on account of rising prices of vegetables and pulses, data released by the government on Wednesday, July 12 showed.

In March, the Consumer Price Index-based inflation was recorded at 5.66%.

According to the data released by the National Statistical Office (NSO), the inflation in the food basket was at 4.49% in June, higher than 2.96% in May. The food basket accounts for nearly half of the CPI.

According to CNBCTV-18, rural inflation rose to 4.72%, up from 4.17% in May, while urban inflation increased to 4.96% from 4.27% in the same period.

Aditi Nayar, chief economist and head – research and outreach, ICRA, told PTI that the spike in vegetable prices is set to push the CPI inflation to an uncomfortable 5.3-5.5% in July.

“We expect the vegetable price shock to result in the Q2 FY2024 CPI inflation exceeding the (RBI’s) Monetary Policy Committee’s last forecast of 5.2%,” she told the news agency.

“Accordingly, we anticipate that the [RBI] committee will retain its hawkish tone in August 2023, keep the repo rate unchanged and signal that a pivot to rate cuts remains distant,” she said.

Suvodeep Rakshit, senior economist at Kotak Institutional Equities, told CNBCTV-18 that the June CPI inflation of 4.8% exceeded expectations slightly due to a surge in vegetable prices, accompanied by a modest increase in pulses prices.

“This trend in vegetable prices continued in July too. Core inflation was broadly unchanged at 5.1% but will likely moderate over the next few months. Overall, we see upside risks to CPI inflation over the next few months as monsoon-related risks on food prices play out,” he said.

Narinder Wadhwa, national president of Commodity Participants Association of India, told the news agency: “It [the rise in food prices] may be influenced by various factors such as changes in demand-supply dynamics, fluctuations in global commodity prices, government policies, or other economic factors. The rise in inflation is higher than street’s expectations.”

Retail Inflation Falls to 6.77% In October, but Stays Above RBI’s Tolerance Level

The Consumer Price Index-based retail inflation has remained above the Reserve Bank of India’s 6% target since January this year.

New Delhi: Retail inflation dropped to 6.77% in October from 7.41% in the preceding month, mainly due to easing prices in the food basket, government data showed on Monday, November 14.

However, it remained above Reserve Bank of India’s comfort level for the 10th month in a row, the data showed.

The Consumer Price Index (CPI)-based retail inflation has remained above the 6% target since January this year.

As per the latest data released by the National Statistical Office (NSO), the inflation in the food basket was 7.01% in October as against 8.6% in September.

The retail inflation, which the RBI factors in while deciding its periodic monetary policy, was 4.48% in October 2021.

As the RBI failed to ensure inflation remains at 4% with a margin of 2% on either side for three consecutive quarters, it has sent a report to the government detailing the reasons for the failure and steps it is taking to bring CPI in the target range.

Another set of data released earlier in the day revealed that the wholesale price index (WPI)-based inflation dipped to a 19-month low of 8.39% in October on easing prices of food, fuel and manufactured items.

(PTI)

To Tackle Inflation, RBI Needs to Learn From Its Recent Mistakes

The errors committed in the monetary policy response post-2009 should help the central bank form a strategic vision with a medium-to-long term action plan for ‘inflation targeting’.

The Reserve Bank of India’s Monetary Policy Committee (MPC) met recently to announce its quarterly statement. The committee announced an increase in the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 4.90% with immediate effect.

The standing deposit facility and bank rate were also adjusted further. The committee also decided to remain focused “on withdrawal of ‘accommodation’ to ensure that inflation remains within the target going forward, while supporting growth”.

The central bank panel also acknowledged how Consumer Price Index (CPI) headline inflation rose further from 7.0% in March 2022 to 7.8% in April 2022 (in May 2022, this eased to 7.04%), reflecting a broad-based increase in all its major constituents. Food inflation pressures are accentuated, led by cereals, milk, fruits, vegetables, spices and prepared meals. Fuel inflation was driven up by a rise in LPG and kerosene prices. Core inflation (i.e., CPI excluding food and fuel) hardened across almost all components, dominated by the transport and communication sub-group.

Source: RBI-Monetary Policy Committee Statement (June)

In its outlook, the MPC projects inflation at 6.7% in 2022-23, with Q1 at 7.5%; Q2 at 7.4%; Q3 at 6.2%; and Q4 at 5.8%. On growth, the group acknowledged the presence of significant spillovers from prolonged geopolitical tensions, elevated commodity prices, continued supply bottlenecks and tightening global financial conditions nevertheless, all weighing heavily on the overall macroeconomic outlook. Taking these into consideration it expects India’s real GDP growth projection for 2022-23 to be around 7.2% with Q1 at 16.2%; Q2 at 6.2%; Q3 at 4.1%; and Q4 at 4.0%.

Analytical interpretation

It seems like a redundant exercise, digging deeper into growth model predictions projected by the RBI, or any other institution, especially at a time when the degree of global economic and political uncertainty, and the ‘spillover effects’ of existing exogenous (or external) crisis factors – from global stagflationary concerns to a war – are all weighing heavily on any nation’s macroeconomic positioning.

Even though the RBI thinks, India may clock an annual growth rate of 7.2% rate (when adjusted for inflation), other institutions like the World Bank have already slashed India’s GDP growth forecast to 7.5% (which is the second time the Bank has revised down its growth forecast for India in the ongoing financial year).

The key issue here for the RBI is inflation’, a problem that over the last two years it has miserably failed to stay on course. Initial trends were visible for much of 2021, before it started peaking early this year.

The central bank, whose mandate is to target low inflation and keep it within a reasonable limit, was seen to be keener on doing everything else – from exchange rate targeting to ensuring greater (and more favourable) terms for government borrowing – while playing down any significant concerns surfacing on the ‘inflation end’ as a “temporary occurrence”.

In terms of response, economist Josh Felman quite accurately described three key lessons that the RBI should and must have learnt from its post-2009 handling of high inflation when in December 2009, inflation started to rebound; by March 2010 it had soared to nearly 10%. It turned out that, contrary to expectation, food inflation was indeed influencing other prices. The RBI didn’t want to raise interest rates then (too) as it would endanger India’s nascent post-financial crisis recovery. It felt the rise in inflation was also explained by “exogenous” (external) factors and expected things to go back to normal after a “temporary phase”.

Fast forwarding the picture to 2022, the RBI seems to be caught in a similar situation now. It doesn’t want to raise interest rates (though it is trying to do so in its recent MPC statement) to avoid any significant spillover effects from a tough monetary policy stance to pass on to growth. Still, the three lessons, the RBI needs to learn from the 2009 saga, as Felman argues are:

“Broad-based and sustained increases in food prices are dangerous, as they can set off a serious inflation fire.
Food price increases are particularly dangerous when interest rates are at exceptionally low levels, as this only fans the inflation flames.
In such circumstances, the RBI cannot sit on its hands. It needs to act quickly to douse the flames, by raising interest rates as fast as possible to normal levels and beyond.”

So far, it is difficult to assess the RBI’s medium-to-long term stance. One may only hope that its gross negligence in the discharge of its principal obligation i.e. to keep core inflation in check-will become its primary priority, instead of being seen to become a bank that is toeing the government line and seems to only care-caters to the macroeconomic priorities of the government.

Inflation as an ‘invisible tax’

The pressing need to keep inflation in check for the RBI or any developing country’s central bank is more important than any other function, and while this may come at the cost of keeping expectations from growth lower (which no government would appreciate), there is an analytical logic to this policy priority.

For one, developing countries like India have other key structural issues embedded and any spillover effects from a sustained price rise – from its effect on cost of production to labour market wages – would exacerbate those issues, which may later go beyond the scope of what a central bank’s or even government’s toolkit may address.

India has widespread inequality and a broken, disjointed, highly informal labour market where the willingness (and ability) to pay for essential commodities, services and wages are significantly different across social, economic and other identity-based groups. Even a marginal 1-2% increase in core inflation rate over the short term, whether from the WPI or CPI side, adversely impacts the (lower) social economic class, imposing an unfair ‘invisible tax’ on them.

Labourers work next to electricity pylons in Mumbai, India, October 13, 2021. Photo: Reuters/Francis Mascarenhas

RBI should manage expectations with care

How can the RBI reassure the public that it has indeed learned from its mistakes and the lessons it would have drawn from a post-2009 response to high inflation and stagflation concerns? Well, that would require a tight rope balancing act, not a panicky, poorly explained rate increase.

First, don’t blindly follow the US Federal Reserve’s monetary policy moves. Rather, by providing a convincing assessment of India’s own core inflation outlook and risks; a detailed description of the RBI’s medium-to-long strategy in targeting inflation is needed now more than ever; combined with an explanation of why it is convinced ‘this strategy’ (if offered) would be sufficient to bring inflation back to the intended 4% in a timely fashion. This will require the RBI to push for greater independence and assert its autonomy to make decisions that may not go well with the finance ministry’s (or the Prime Minister’s Office’s) line of thinking. Else, the adverse costs of pursuing a path of ‘gross negligence and/or not creating a strategic action plan for the medium-to-long term (as the RBI did) may only further weaken India’s macroeconomic core, which already seems to be headed towards a ‘free-fall’ at the moment.

Fed’s Rate Hike and Domestic Inflationary Pressures Present Double Whammy for Retail Investors

For now, the outlook remains foreboding and ominous.

Mumbai: If you are a retail investor who is given to bouts of panic, this might not be the best time to check the status of your mutual funds and portfolio.

Alternatively, if you are a retail investor who believes that India’s growth story is still intact, no matter the dampening inflation, then this might be the time for you to step up your market investments.

This could be the best of times for your investment portfolio if you accumulate the choicest blue chip companies for the long run. This could be the worst of times for your portfolio where you might possibly run out of your cash reserves while buying the dip, only for the dip to dip further.

Whichever camp you belong to, that there is bloodbath on Dalal Street is beyond doubt. On June 15, Federal Reserve Chairman Jerome Powell delivered a 75 basis point interest rate hike – the largest in three decades – generating murmurs of an imminent recession.

In India, the bourses have been crumbling as foreign institutional investors or FIIs look to exit the market in droves attesting, in a way, the age-old maxim of the world catching a cold when the US sneezes.

In fact, by May 20 of this year, FIIs had been net sellers of India equities for the last eight months, with total net outflows in FY23 thus far at $6.8 billion following record-high annual outflows of $18.5 billion in FY22. The debt market has also seen outflows by FIIs over the last few months, with net outflows of $1.4 billion in FY23 thus far, versus inflows of $268 million in FY22.

Also read: Rupee’s Ride Is Only Going to Get Bumpier as 2022’s Whirlwinds Sweep Across the Economy

Domestic institutional investors or DIIs, however, have consistently remained strong buyers of Indian equities, partly making up for huge FII outflows, even as the fresh inflows via the systematic investment plan or SIP route have fallen marginally. They have invested a total of Rs 66,000 crore in FY23 thus far, after putting in nearly Rs 2.2 lakh crore in FY22. In fact, May 2022 marked the 15th consecutive month of net buying by DIIs.

One can gauge the retail investors’ appetite for the markets from the fact that direct investments by them in FY22 ballooned to Rs 1.64 lakh crore, which is nearly 2.5 times the net inflows during FY21.

For now, the outlook remains foreboding and ominous.

Fed Chair Powell’s decision to hike the interest rate will likely trigger another exodus of capital from the equity markets to the safe havens of US treasury bonds and gold. Chair Powell said in so many words that coming interest rate hikes will be dependent on the data emanating from the ground and the policy will pivot around bringing inflation back within the 2% range.

“We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy. Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common. From the perspective of today, either a 50 or 75 basis point increase seems most likely at our next meeting. We will, however, make our decisions meeting by meeting, and we will continue to communicate our thinking as clearly as we can. Our overarching focus is using our tools to bring inflation back down to our 2% goal and to keep longer term inflation expectations well anchored.” Chair Powell said.

The inflationary crackdown

There’s no escaping the heat of inflation, be it one running rampant in the US or in India.

Recurrent invocations of different inflation figures under its large taxonomy will roll off your memory but the existential bite of expenses is likely to linger for long. Inflationary pressures on food articles as well as natural gas, crude oil, minerals and power segment were visible in the wholesale and retail price indices.

The Wholesale Price-based Inflation (WPI) for the month of May stood undented in double figures for the 14th consecutive month. In May, the WPI inflation also continued its upward march for the third consecutive month surging to a whopping 15.88%.

FILE PHOTO: A labourer carries a sack of onions at a wholesale market in Kolkata, India, December 14, 2021. REUTERS/Rupak De Chowdhuri

Retail or Consumer Price Index (CPI) inflation for the month of May eased to 7.04% from the 95-month high of 7.79% in April.

Seen in the fine print, the CPI figures for all the six groupings under the CPI witnessed a sequential increase. Beyond the statistical onslaught, the reader would be aggrieved to know that year-on-year inflation for vegetables spiked up to 18.3% from 15.4% in May 2021 led by a sharp price rise in tomatoes, potatoes, pear and cauliflower.

Additionally, prices of meat and fish and milk products hardened as well in May compared to April this year, reflecting the impact of extreme weather conditions in different parts of the country. As per ICRA, the food and beverage index rose by a strong 1.5% with a broad-base increase in nine of the 12 sub-groups, which include, spices, vegetables, meat and fish.

Also read | Raging Inflation: Why Your Chicken Curry Is the Most Expensive it Has Been in 5 Years

Price pressures eased off a bit on certain select commodities primarily because of the Indian government’s decision to place a ban on the export of wheat and sugar. This had the effect of scuttling large leap increases in the prices of wheat and sugar. Additionally, duty-free import of crude varieties of edible oil also contributed to the prices of edible oil remaining relatively stable compared to the month of April. However, the going forward will be dictated by weather conditions across the country and the impact of the monsoon.

Meanwhile, frustrating India’s attempt to tame inflation is rising international crude oil prices which breached the $120 per barrel mark (Indian basket) on June 9. Growing demand from the Chinese economy and rising supply from Russia despite fresh sanctions by European Union countries on Russian oil are spearheading the undesirable yet inevitable rise in crude oil prices.

If the upward bias of international crude oil prices continues unabated, it will only add to the government’s bill of excise duty cut, leading to a situation where higher crude oil prices will render the excise cuts meaningless.

Retail Inflation Soars to 8-Year High of 7.79% In April as Food Prices Spike

The RBI has been mandated by the government to ensure that inflation remains at 4% with a margin of 2% on either side.

New Delhi: Retail inflation soared to an eight-year high of 7.79% in April on annual basis mainly due to stubbornly high food prices, remaining above the Reserve Bank of India’s (RBI) upper tolerance level for the fourth month in a row.

Inflation based on the Consumer Price Index (CPI) was 6.95% in March this year and 4.23% in April 2021.

Inflation in the food basket rose to 8.38% in April from 7.68% in the preceding month and 1.96% in the year-ago month.

The RBI has been mandated by the government to ensure that inflation remains at 4% with a margin of 2% on either side.

Also read: Raging Inflation: Why Your Chicken Curry Is the Most Expensive It Has Been in 5 Years

The retail inflation has remained above 6% since January 2022.

After the off-cycle Monetary Policy Committee (MPC) meeting of RBI last week, RBI governor Shaktikanta Das had said the adverse effects of the unprecedented high global food prices due to the ongoing geopolitical situation are reflecting in the domestic market as well, and going forward inflationary pressures are likely to continue.

Meanwhile, sources said the central bank is likely to raise inflation projections in the MPC meeting next month and would also consider a rate hike to tame inflation which is above its comfort level.

Earlier this month, the MPC raised the key policy rate (repo) by 40 basis points with an aim to tame the rising inflation. It was the first rate hike after August 2018.

(PTI)

Retail Inflation Shot Up to 6.95% in March: Government

It is for the third straight month that the retail inflation remained above the Reserve Bank of India’s comfort zone.

New Delhi: Consumer price-based inflation jumped to 6.95% in March, mainly on account of costlier food items, according to government data released on Tuesday.

The Consumer Price Index (CPI) based inflation was 6.07% in February.

The inflation in the food basket was 7.68% in March, up from 5.85% in the preceding month.

It is for the third straight month that the retail inflation remained above the Reserve Bank of India’s comfort zone.

RBI, which mainly factors in the retail inflation while arriving at its bi-monthly monetary policy, has been tasked by the government to keep the inflation between 2 and 6%.